Case study

Winding up of defined benefit scheme

The client

Multi-site Retail business

Nos of employees in scheme:

1,500

Project overview

The employer approached CBC to help them with the wind up of the closed defined benefit pension scheme. The clock was ticking because the company had sold the underlying businesses and wanted to pay a final dividend and then enter voluntary liquidation.

Like so many schemes it was not ready to be wound up – and certainly not in fast time. The scheme was in deficit on every actuarial measure. The investments were around 75% in global equities and the rest in government gilts, predominantly in 5-10 years rather than longer time periods. Added to that, the scheme data was not in good condition, with lots of deferred members having lost touch with the scheme. All this made it an unattractive scheme to an insurer.

How CBC managed the winding up of the defined benefit scheme

We worked with the employer and the trustees to develop a project plan which incorporated the trustees taking advice to move the scheme investments into more suitable assets for an insurer (and in so doing reduce the costs of the wind up) and develop the processes needed to review and clean the member data. We then worked with the trustees to implement the payment of small benefits to members which would otherwise have been included in the overall costs of the wind up.

In advance of the pension scheme investments being moved to less volatile assets, we set out a plan for the employer to pay monies to the pension scheme trustees to enable them to bring the funding level up the estimated buy-out amount. We proposed potential insurers and solutions including medically underwritten annuities in order to reduce the total cost of the wind up.

The final outcome

The scheme was then wound up, asset transferred to the insurer, the deed off closure prepared by the Trustees legal advisers and the employer was able to pay a dividend to its shareholders – all within six months of starting the project. This enabled the employer to enter voluntary liquidation and the shareholders to receive their final dividend.

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Wind up of pension scheme